SEC invites comments on proposed NFA rule change concerning security futures products disclosures

Maria Nikolova

Under the proposed change, Securities Investor Protection Corporation coverage for cash protection mentioned in the disclosure is raised to $250,000.

The United States Securities and Exchange Commission (SEC) has published a notice inviting comments on proposed rule changes by the National Futures Association (NFA).

The proposed rule amendment concerns NFA’s Interpretive Notice 9050 entitled “NFA Compliance Rule 2-30(b): Risk Disclosure Statement for Security Futures Contracts” . It requires NFA Members and Associates who are registered as brokers or dealers under Section 15(b)(11) of the Exchange Act to provide a disclosure statement for security futures products (SFPs) to a customer at or before the time the Member approves the account to trade SFPs. The risk disclosure statement includes, inter alia, a section on Securities Investor Protection Corporation (SIPC) coverage for cash protection.

NFA plans to amend Section 6.1 of Interpretive Notice 9050 to reflect that SIPC coverage for cash protection has increased from $100,000 to $250,000.

The risk disclosure statement for SFPs is a uniform statement that was jointly developed in 2002 by NFA, FINRA, and a number of securities and futures exchanges. SEC staff recently contacted NFA and requested a change to Section 6.1 of the Risk Disclosure Statement to reflect that SIPC coverage for cash protection has increased from $100,000 to $250,000. Accordingly, NFA’s amendment to Section 6.1 of Interpretive Notice 9050 is a minor amendment to correct the limit of SIPC cash protection.

The proposed rule change is authorized by, and consistent with, Section 15A(k)(2)(B) of the Exchange Act.8 That Section requires NFA to have rules that are designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, and, in general, to protect investors and the public interest, in connection with SFPs.

NFA does not believe that the proposed rule change will lead to any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. The proposed change is not expected to impose any additional reporting requirements or costs on Members.

Interested persons are welcome to submit written data, views, and arguments concerning the proposed change. Comments may be submitted by the following methods: Electronic comments:

  • Use the Commission’s Internet comment form (http://www.sec.gov/rules/sro.shtml); or
  • Send an e-mail to [email protected] Please include File Number SR-NFA-2018-04 on the subject line.

Paper comments:

Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street, NE, Washington, DC 20549-1090. All submissions should refer to File Number SR-NFA-2018-04. This file number should be included on the subject line if e-mail is used.

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